Custom, Excise & Service Tax Tribunal
M/S. Brahmani River Pellets Ltd vs Commr. Of Central Excise, Customs & on 8 January, 2015
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EAST REGIONAL BENCH : KOLKATA
Excise Appeal No. E-877/2011
(Arising out of the Order-in-Original No. CCE/BBSR-I/05/2011 dated-30/06/2011 passed by the Commissionerof CentralExcise, Customs & Service Tax, BBSR-I)
For approval and signature of:
DR.D.M. MISRA, HONBLE JUDICIAL MEMBER
DR. I.P. LAL, HONBLE TECHNICAL MEMBER
======================================================
1. Whether Press Reporters may be allowed to see :
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not ?
3. Whether Their Lordships wishto see the fair copy :
of the Order?
4. Whether Order is to be circulated to the Departmental :
Authorities ?
M/s. Brahmani River Pellets Ltd.
APPELLANT(S)
VERSUS
Commr. of Central Excise, Customs &
Service Tax, BBSR-I
RESPONDENT(S)
APPEARANCE
Sri S.C. Mohanty, Advocate
FOR APPELLANT(S)
Shri S.C. Jana, Spl. Counsel
FOR THE RESPONDENT(S)
CORAM:
DR.D.M. MISRA, HONBLE JUDICIAL MEMBER
DR. I.P. LAL, HONBLE TECHNICAL MEMBER
DATE OF HEARING : 08/01/2015
Pronounced on :12/06/15
ORDER NO : FO/A/75298/2015
Per DR. D.M. MISRA
This is an appeal filed against Order-in-Original No. CCE/BBSR-I/05/2011 dated 30/06/2011 passed by the Commissioner of Central Excise, Bhubneswar-I.
2. Briefly stated the facts of the case are that the appellant having its factory at Jajpur, Orissa engaged in the manufacture of iron oxide pellets falling under Chapter 26 of CETA, 1985. A Show Cause Notice was issued to them alleging that the appellant had irregularly availed CENVAT Credit at their Jajpur Plant amounting to Rs.5,61,96,857/- during the period from November, 2009 to August, 2010 on inputs, capital goods and input services received and used in their beneficiation plant at Barbil. It was alleged that since the inputs, capital goods and input services were used in their beneficiation plant, a separate factory, situated at a different and demarcated place, around 221kms. away from Jajpur plant, therefore, the CENVAT Credit is not admissible at their factory at Jajpur. Further, it is alleged that since the said inputs, capital goods and input services were not used in their factory at Jajpur but used at Barbil in their benefication plant in or in relation to the manufacture of Iron Ore Concentrate, exempted under Notification No. 4/06-CE dated 1/03/2006, hence not eligible to CENVAT Credit in view of Rule 6 (1) and Rule 6 (4) of CENVAT Credit Rules, 2004. The Ld. Commissioner on adjudication, confirmed the demand and imposed penalty of Rs.2.00 Crores under Rule 15 (1) of the CENVAT Credit Rules, 2004. Hence the present appeal.
3. Advancing the argument on behalf of the appellant, the Ld. Advocate Shri S.C. Mohanty for the appellant had submitted that in order to use the iron ore obtained from mines by subjecting to the process like crushing, screening, sizing, etc. known as beneficiation process, a separate plant had been set up at Barbil around 221 Kms. away from their jajpur factory. He has submitted that the iron ore concentrate manufactured in the beneficiation plant is classifiable under Chapter Sub-Heading 260011150 of CETA, which is an intermediate product for the manufacture oftheir final products i.e. Iron oxide pellets at Jajpur plant. He submits that the inter-mediate product is transferred from the Barbil plant to Jajpur in slurry form through specially designed pipeline and the entire quantity of slurry concentrates are consumed in their Jajpur plant for manufacture of iron oxide pellet and not cleared/sold to any one else.
4. It is his submission that CENVAT Credit availed on capital goods used for manufacture of exempted inter-mediate product i.e. iron ore cencentrate which had been ultimately used in the manufacture of dutiable products, is admissible to CENVAT Credit in view of CBEC Circular No. 665/56/2002-CX dated-25/09/2012. The said circular of the Board does not qualify that the inter-mediate product has to be manufactured within the factory producing the final product. It is his submission that the beneficiation plant at Barbil is their Captive plant and the process carried out there is integral to and inter-linked with the manufacture of iron oxide pellet at Jajpur, hence CENVAT Credit availed on the inputs, capital goods and input services used in Barbil Plant are admissible. In support, he has referred to the decision of Honble Supreme Court in JaypeeRewa Cement Vs. CCE 2001 (133) ELT 3 (SC), Vikram Cement Vs. CCE 2005 (187) ELT 145 (SC) and 2006 (194) ELT3 (SC).
5. Further, he has submitted that since Barbil plant is their captive plant, they requested to include the said beneficiation plant in the ground plan/ registration certificate of Jajpur factory, which was erroneously rejected by the Department. He has submitted that after elaborate discussion and analysis of the legal provisions, the Honble Supreme Court in Jaypee Rewa Cements case held that explosives used in Mines for blasting to produce lime stone for use in manufacture of cement/churners in the factory situated at some distance from the mines would be treated as input and eligible to CENVAT Credit. In Vikram Cements case, the Honble Supreme Court held that capital goods used in Mines are eligible to CENVAT Credit if the Mines are captive mines so that they constitute one integrated unit together with the cement factory. Further, the Ld. Advocate has submitted that the input services used in the beneficiation process at Barbil and bringing slurry through pipelines are definitely eligible to CENVAT Credit as the same are used in or in relation to manufacture of final products. It is his submission that the input services used in bringing the slurry have deep nexus with the manufacturer of the final products at Jajpur Plant. In support, he has referred to the decision of Bombay High Court in the case of Deepak Fertilisers& Petrochemicals Corpn. Ltd. Vs. C.C. Ex., Belapur- 2013 (32) STR 532 (Bom).
6. Advancing their alternate argument, the Ld. Advocate has submitted that duty paid on inputs, capital goods and service tax used in or in relation to the manufacture of iron ore concentrate in the beneficiation plant at their Barbil Unit are eligible to CENVAT Credit at the said factory. It is his submission the Appellant had commenced manufacture of the dutiable product viz. Iron Ore Concentrate after the said unit was registered with the Central Excise Department w.e.f. 26/11/2012 and removed the same w.e.f. 07/06/13 on payment of duty. The Ld. Advocate has categorically submitted that production of slurry concentrates commenced from 06/06/2013, even though the Central Excise registration was obtained on 26/11/2012. It is his submission that the capital goods were never used in the beneficiation plant during the period when the concentrates remained exempted under Notification No. 04/2006-CE. Iron Ore concentrates had been manufactured for the first time w.e.f.06/6/2013 which was a dutiable product at the time of commissioning of the beneficiation plant. It is his submission that in view of the documentary evidences, it cannot be said that the capital goods, inputs and input services received in the beneficiation plant were used for the manufacture of exempted goods under CENVAT Credit Rules, 2004. The Ld. Advocatehas fairly submitted that this alternative argument is now raised for the first time before this Tribunal and this plea was not raised before the adjudicating authority. Rebutting to the contention of the Ld. Special Counsel for the Revenue that the capital goods procured prior to registration of the beneficiation plant would not be eligible to the credit, the Ld. Advocate has submitted that in view of the Boards Circular bearing No. 88/88-94-CX dated-26/12/1994, a manufacturer intended to take credit of duty paid on capital goods, procured by him during setting of the factory would file declaration under erstwhile Rule 57Q irrespective of the fact that such a factory has not come into existence and or got registered. The Ld. Advocate also placed reliance upon the decision of the Tribunal in the case of J.R. Herbal Care India Ltd. Vs. Commr. of Central Excise, Noida -2010 (253) ELT 321 (Tri.-Del.)
7. Per contra, the Ld. Special Counsel Shri S.C. Jana for the Revenue has submitted that factory located at Barbil at a distance of more than 221 Kms. from their Jajpur plant, where the finished goods viz. iron oxide pellets are manufactured, cannot be treated to be situated in the precincts of the later factory in view of the decision of the Honble Supreme Court in the case of South Eastern Coal Fields Ltd. Vs.CCE -2006 (200) ELT 357 (SC) and Central Coalfields Ltd. Vs. CCE, Jamshedpur-2001 (137) (ELT) 752 (Tri-Kolkata). In the present case, since the plants are not situated in adjacent premises, therefore, it cannot be reasonably or logically or legally be treated as one and the same plant and entitled to single registration certificate. Therefore, the Ld. Commissioner has rightly rejected the request for a unified registration certificate for both these plants situated at 221 kms. away from each other.
8. Distinguishing the principle laid down M/s Jaypee Rewa Cement and M/s. Vikram Cements case, the Ld. Special Counsel submitted that unlike in the aforementioned cases, no input service or input or capital goods was ever used by them in any of their captive mines or in any process of manufacture and it had no nexus with the manufacture of dutiable iron oxide pellets at their Jajpur plant. In the present case, the duty paid capital goods, inputs and input services in question were received, installed and also used at the Barbil plant used in or in relation to the manufacture of exempted iron ore concentrates. It is submitted that since the Barbil Plant and the Jajpur Plant of the appellant cannot be construed as one and the same unit, therefore, credit on inputs, input services and capital goods cannot be admissible at their Jajpur plant.
9. Rebutting the contention of the appellant that the duty paid input services need not be received in the factory at Jajpur, to be eligible to CENVAT Credit, he has submitted that the undisputed fact is that the duty paid input services were received in their Barbil Plant and used there in or in relation to the manufacture of exempted iron ore concentrates in that plant. It is, therefore, clear that the CENVAT Credit of duty paid on such input services which were used in or in relation to the manufacture of exempted iron ore concentrates at Barbil plant, cannot be allowed to be utilized for payment of duty on iron oxide pellets manufactured at Jajpur plant.
10. Further countering the contention of the Ld. Advocate for the Appellant that the appellant had obtained registration on 26/11/2012, and commenced production from 06.06.2013 the iron ore concentrate which become a dutiable product w.e.f 01.03.2011, hence they would be eligible to avail CENVAT Credit at their Benefication plant at Barbil thereafter, the Ld. Spl. Counsel submitted that the issue raised for the first time should not be entertained and also that would not wipe up their illegal action of availing CENVAT Credit during the period 2009-2010 at their Jajpur plant.
11. Heard both sides and perused the records. The principal issue for determination is: whether the appellants Jajpur Unit engaged in the manufacture of Iron oxide pellets, a dutiable product, are eligible to avail CENVAT Credit on inputs, capital goods and input services used in or in relation to manufacture of iron ore concentrate at their Barbil Plant, which were ultimately be transferred to their manufacturing unit at Jajpur for manufacture of the said dutiable pellets falling under Chapter 26 of CETA, 1985.
12. The contention of the Ld. Advocate for the appellant is that benefication plant at Barbil had been installed wherein various inputs, capital goods and input services are used in the manufacture of iron ore concentrates, later transferred to their Jajpur plant through pipelines, exclusively to be used in the manufacture of iron oxide pellet. It is their contention that even though the benefication plant at Barbil Plant is situated around 220 Kms. from the pellet plant at Jajpur, due to inter linkage and inter dependence of manufacture of the iron ore slurry and the finished product, namely iron oxide pellets, both these units ought to be considered as one and the same factory, entitled to unified registration under the Central Excise Act, 1944.
13. We find that while rejecting the said contention, the adjudicating authority has after analyzing the meaning and scope of factory defined at Section 2(e) of the CEA, 1944 and the scope of the word precincts as per the Collins English Dictionary, New Shorter Oxford English Dictionary and Blacks Law Dictionary, 7th Edition, concluded that a single registration for these two separate plants situated at different places and engaged in manufacture of different products, classifiable separately under the Central Excise Tariff Act, 1985, cannot be granted. The Ld. Commissioner has recorded reasons at para 6.2& 6.3 of the Order as:
iron ore pellets are manufactured at Jajpur plant, and the manufacturing activity is an independent operation. Similarly the manufacturing of iron ore concentrates in the benefication plant is also an independent manufacturing operation with manufacturing of separate excisable goods i.e. iron ore concentrates.Manufacturing activity leading to manufacture of iron ore concentrates is in no way connected to the manufacturing activity of pellets. The iron ore concentrates are raw materials for manufacture of pellets. These are cleared independently and since are in slurry form are transported through pipeline of about 221 kms. Mere transportation of goods in a pipeline does not make the benefication plant at Barbil a connected plant to Jajpur and can be construed, having undertaking a process connected to manufacture of iron ore pellets.
I. Although iron ore concentrate is a raw material forPellets, its manufactured independently at the benefication plant, and cleared to be received at pellet plant. It is only incidental that, since the concentrates are in slurry form it is transported through a pipe line. Transportation is a separate activity independent of manufacturing operation. It is matter of convenience that the iron ore concentrates are transported through a pipe line. Existence of a pipe line which is a special transportation facility cannot functionally connect, both the plant, treating them an integrated plant. If that be so then all plants supplying raw materials to another plant by any mode of transport would be treated a integrated plants or parts of other plants and there would not be any concept of separate factories.
II. That definition of the factory, refers to an area/premisesincluding a surrounding area of the main area (precincts thereof) where manufacturing of excisable goods or any process connected to manufacture of such excisable goods are undertaken. As per the definition, premises and precincts thereof (surrounding area) is first to be recognized, and can be treated as a factory if the manufacturing of excisable goods or any process connected to manufacturing of such excisable goods are undertaken in that area. Any area not surrounding the main area cannot be treated as the part of the main area. In the instant case both the plants are not located in one place. Since the Barbil plant is located at 221 km. away from Jajpur plant without any geographic contiguity its location cannot be treated as an areas surrounding to Jajpur plant.
6.3 Both the plants as discussed above manufacture, separately distinct excisable goods in separately distinct areas/premises. Therefore, both the areas/premises can be treated as two separate factories under Section 2 (e) of CEA, and cannot be treated as one factory.
14. We do not see any error or discrepancy in the aforesaid reasoning of the Ld. Commissioner. Merely because the exempted iron ore concentrate manufactured at a separate plant and transported through pipe line for exclusive use in the manufacture of iron oxide pellets, to another factory situated 221 kms away would not make the two factories as one and the same. In our opinion also, the transfer of raw materials i.e. iron ore concentrate in slurry form through pipe line from Barbil factory to Jajpur Pellet factory cannot be construed that the Barbil plant is a captive plant of the Jajpur factory and entitled to a single Registration.
15. The next contention of the Ld. Advocate for the appellant is that in view of the judgment of the Honble Supreme Court in the case of Vikram Cement Vs. CCE, Indore-2006 (194) ELT (3) (SC) the input, capital goods and input services used in the manufacture of iron ore concentrate which are later transferred to their Jajpur plant for the use of manufacture of iron pellets, are eligible to CENVAT Credit at Jajpur factory. We do not find substance in the said contention of the Ld. Advocate in as much as facts and circumstances in Vikram Cements case and that of the facts of the present case are diagonally opposite. The Honble supreme Court in the case of Collector of Central Excise, Calcutta Vs. AL Noori Tobacco Products 2004(170) ELT 135(SC) emphasizing the necessity of care and caution in applying the principle of precedent observed as:
11.?Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclids theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes. In London Graving Dock Co. Ltd. v. Horton (1951 AC 737 at p. 761), Lord Mac Dermot observed :
The matter cannot, of course, be settled merely by treating the ipsissimavertra of Willes, J as though they were part of an Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract from the great weight to be given to the language actually used by that most distinguished judge.
12.?In Home Office v. Dorset Yacht Co. [1970 (2) All ER 294] Lord Reid said, Lord Atkins speech is not to be treated as if it was a statute definition. It will require qualification in new circumstances. Megarry, J in (1971) 1 WLR 1062 observed: One must not, of course, construe even a reserved judgment of Russell L.J. as if it were an Act of Parliament. And, in Herrington v. British Railways Board [1972 (2) WLR 537] Lord Morris said :
There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances made in the setting of the facts of a particular case.
13.?Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper.
14.?The following words of Lord Denning in the matter of applying precedents have become locus classicus :
Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive. ??***??????????***?????????????*** Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it.
16. In the Vikram Cements case, their Lordships have been confronted with the issue whether duty paid on explosives and other inputs, capital goods used inthe mines situated at a distance from the factory for extraction of lime stone which were used in the manufacture of cement and klinkers classifiable under Chapter 25, are eligible to CENVAT Credit or other wise.
17. The facts of the present case are however, stands on a different plane. As narrated in their submission, the appellant receive iron ore fines(uneven sizes) from the mines which are stored in the Silos installed in the benefication plant at Barbil. The iron ore fines are fed into the Grinding Mill for primary grinding, thereafter to the Ball Mill for further grinding, wherein the iron ore fines ultimately converted into the powder form. The grinded iron ore fines are transferred to Allflux for size classifier for getting the required sizes of iron ore fines. From the Allflux, the fines are transferred to Magnetic Separator, wherein magnetic impurities are removed from the iron ore fines.Then the iron ore fines are sent to the Thickener, where the settling behavior of iron ore fines densification takes place. The required density product is the final product, which is pumped to slurry tank for storage. From slurry tank, the material is transferred to the Pellet plant through Geho Pump Slurry Lines.
18. A careful analysis of the aforesaid series of processes, it is clear that out of iron ore fines(uneven sizes) iron ore concentrates in slurry form are manufactured and transported/cleared through pipelines to their pellet plant. The said iron ore concentrate became chargeable to duty w.e.f 01.03.2011. Therefore, it cannot be said that the inputs were directly used by bringing the same from the mines to the pellet plant at Jajpur. On the other hand, in the benefication plant the Iron Ore fines are converted into Iron ore concentrates in slurry form. In our opinion, therefore, the ratio laid down in Vikram Cements case is not applicable to the facts of the present case. Consequently, the Appellants are not eligible to avail credit at their Pellet plant at Jajpur on the duty paid on the inputs, Capital goods and input services which are used in or in relation to the manufacture of Iron Ore concentrates at the benefication plant at Barbil. However, we find force in the contention of the ld. Advocate that in procuring the iron ore concentrate in slurry form through pipe line from their Barbil plant to Jajpur plant, the services used, fall within the scope of input services being specifically covered under the inclusive part of the definition of input service as prescribed at Rule 2(l) of Cenvat Credit Rules, 2004, hence, eligible to cenvat credit at their Jajpur Plant.
19. An alternative submission for the first time has been advanced on behalf of the appellant is that even though they had availed the CENVAT Credit on the capital goods, inputs and input services in their books of accounts at their Jajpur plant for its use at Barbil Plant, during the relevant period i.e. February ,2009 to August, 2010, however, they had taken Central Excise Registration for their Barbil plant on 26/11/2012 and the beneficiation plant became operational only from 06/6/2013. It is thus their contention that they are eligible to avail CENVAT Credit on the input, input services and capital goods used in or in relation to manufacture of iron ore concentrate w.e.f. 06/6/2013 at their Barbil plant, in the event the same are not admissible at their Jajpur plant.
20. Precisely, it is their submission that they had availed CENVAT Credit on the duty paid on input, input services and capital goods relating to Barbil plant at their Jajpur factory on theoretical basis in their books of accounts; but since the actual production of iron Ore Concentrate commenced from 06th June 2013, and cleared on payment of duty, they are eligible to avail and utilize the said CENVAT credit at their Barbil plant.
21. We find that this issue has been raised for the first time before this Tribunal and it is difficult to ascertain whether they have merely taken CENVAT Credit on their records at Jajpur plant before manufacture of iron ore concentrate at Barbil plant and not utilized the same; these facts need scrutiny and verification by the department.
22. On the issue of imposition of penalty, we find that CENVAT credit had been availed at Jajpur factory, on an interpretation of the relevant provisions of the CENVAT Credit Rules and principle of law laid down by the Honble Supreme Court in Vikram Cements case & other cases and also the demand notice is issued for the normal period without invoking suppression, mis-statement etc., therefore, in these circumstances penal provision, in our view is not attracted.
23. Regarding levy of interest for availing the credit we find that a new plea has been raised by the Appellant, whereby it is claimed that they have availed the CENVAT credit at Jajpur plant in their books of accounts only on theoretical basis; actual production of iron ore concentrate(which become dutiable from 01.03.2011) at Barbil plant commenced from 06.06.2013. In our opinion these facts need to be scrutinized and thereafter the applicability of interest provision be accordingly decided in the light of the principles of law settled in this regard.
We summarize our findings as below :
(a) The Appellants are not eligible to avail cenvat credit at their Jajpur plant on the inputs, capital goods and input services used at their Barbil Plant in the manufacture of iron ore concentrate during the relevant period from November, 2009 to August, 2010, nor the Appellant are eligible to a single Registration for both the Units and to this extent the impugned Order is found to be correct and accordingly upheld;
(b) Cenvat credit would be admissible on the input service, if any, used in bringing the input viz. iron ore concentrate in slurry form through pipe line from Barbil Plant to jajpur plant during the said period; the adjudicating authority is to ascertain the quantum of CENVAT credit involved on the procurement of the input and allow the same;
(c) The new plea of the Appellant before this Tribunal that they had only availed the cenvat credit in their Books of Account at Jajpur Plant, without commencing the manufacture of iron ore concentrate at Barbil Plant and now they are eligible to avail cenvat credit at their Barbil Plant on the inputs, capital goods and input services used there in or in relation to manufacture of dutiable iron ore concentrate, needs to be verified/scrutinized by the department independently, if such claim is filed by the Appellant;
(d) No penalty is imposable for availing cenvat credit at Jajpur Plant during the period from November, 2009 to August, 2010. However, applicability of interest is to be determined on the basis of determination of the new plea now raised on the eligibility of CENVAT credit on the input, input services and capital goods used in or in relation to the manufacture of dutiable Iron Ore concentrate from 06.06.2013 at their Barbil plant.
The impugned Order is modified accordingly and the Appeal is disposed off on the above terms.
( Pronounced in the Court on 12/06/2015 )
Sd/- 12/06/15 Sd/- 12/06/15
(I.P.LAL) (D.M.MISRA) MEMBER (TECHNICAL) MEMBER (JUDICIAL)
k.b/-
Excise Appeal No. E-877/2011
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